What Happens When You Inherit Money?

By David Carnes

If someone dies after having established a living trust, the trust assets won't go through probate. Assets, including any money that you've inherited, can be immediately distributed by the trustee under the terms of the trust deed. On the other hand, when someone dies and you inherit money under a will, you probably won't get the money immediately. The will must first go through probate, a process that determines whether the will is valid and allows interested parties to contest it.

Initiating Probate

Anyone can initiate the probate process by submitting the deceased's will and a certified copy of his death certificate to the clerk of a probate court sitting in the county where the deceased lived. The court will then schedule an initial probate hearing. At the initial hearing, the probate judge will appoint an executor to administer the deceased's property, including all cash and the contents of the deceased's bank account. The court will then present the executor with documents that establish his authority to third parties. With these documents the executor can access the deceased's bank account, for example, or sell the decedent's property to raise funds.

Asset Administration

The executor must create an inventory of all estate assets including cash, real property, personal property and corporate stock. He must also secure payment of all debts owed to the deceased, such as a last paycheck. The executor must pay estate creditors before he may distributes anything to heirs. If necessary, he must sell estate assets to raise the money to pay creditors. If the value of the estate exceeds the federal estate tax exemption, he must also pay estate taxes. If the estate earns at least $600 during the probate process -- interest on bank account funds, for example, or rent from tenants living in real property owned by the estate -- the executor may be required to file a federal tax return on estate income and pay any taxes due. All such payments reduce the amount of money remaining in the estate for you to inherit.

Protect your loved ones. Start My Estate Plan

Litigation

Additional hearings may be scheduled to allow someone to contest the validity or interpretation of the will, or to make a claim against estate property. A company, for example, may argue that the deceased owes money that should be paid out of estate assets, or a relative of the deceased who was not named in the will may argue that he is entitled to inherit money from the estate. Any such payments to creditors or other heirs will come out of estate funds.

Distribution to Heirs

The final stage of the probate process is distribution of estate assets to heirs under the terms of the will. If, after paying creditors, the estate doesn't contain sufficient funds to pay your full inheritance, the court may authorize the executor to liquidate estate assets -- by selling a house, for example -- to raise the money. If the deceased's will states that you are to inherit a specific amount of money and liquidation of assets is insufficient to raise this amount, you will receive less than the amount specified in the will. If the estate is insolvent after paying creditors, you will receive nothing.

Protect your loved ones. Start My Estate Plan
The Inheritance Statute in Washington, DC

References

Related articles

What Are the Requirements for Settling an Inheritance?

The probate process is designed to determine the disposition of property left behind when someone dies. The local probate court oversees the probate process, and an executor handles day-to-day administration of the probate estate. If the decedent left a valid will, the probate court generally respects the terms of the will. If not, state law will determine the distribution of assets.

How to List Cash in a Last Will & Testament

A last will and testament contains your final wishes for how and to whom you want your property distributed upon your death. A will can list personal property such as a gold watch, real property such as your home, or a sum of cash. There are different ways to list cash in a will, and how it is listed can affect how much a beneficiary actually receives, or if he receives anything at all.

State of Georgia Guidelines to Show That a Personal Estate Is Insolvent

Think of it as bankruptcy for the dearly departed. When a person’s estate doesn’t have enough assets to cover its debts, it is considered an insolvent estate. Georgia law requires any available property to first be used to satisfy debts. When there are not enough assets to go around, the law sets an order of distribution and beneficiaries -- even those named in the will -- are last in line and out of luck.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

Does the Executor of Will Debt Need a Beneficiary's Signature to Pay Off Assets & Debts?

When an individual creates a will, he will likely name a personal representative, or executor to handle his estate. The ...

Who Gets Paid First Out of a Deceased's Estate?

Probate is the process of settling a decedent's estate under court supervision. State law may establish an informal ...

Can the Executor of a Will Spend the Money Any Way He Wants?

When someone dies and leaves a will, the will instructs how the deceased's property should be distributed. Likely, it ...

What Do I Do if My Father Had a Will & Has Died?

As soon as your father died, his property became his probate estate. If he left a will, his property will probably be ...

Browse by category
Ready to Begin? GET STARTED